The government’s flagship Mortgage Guarantee Scheme, set up to help buyers with small deposits, supported just 56,000 completions before closing to new applications this summer – a fraction of the overall housing market, official figures show.
Launched in April 2021 to maintain mortgage availability during the pandemic, the scheme allowed lenders to buy a government guarantee on loans where borrowers had less than a 10% deposit.
Over four years, it accounted for only 1.4% of all residential mortgage completions, with £11.5 billion in lending underpinned by £1.7 billion of guarantees.
The average property purchased through the scheme cost £215,467, well below the UK average of £271,000. Seven in ten completions were for homes valued under £250,000, with terraced and semi-detached houses the most common purchases.
FIRST-TIME BUYERS
It was overwhelmingly used by first-time buyers, who made up 86% of completions. Borrowers typically had modest incomes, with 42% of households earning less than £50,000 a year.
Take-up varied sharply across the UK. Scotland accounted for 21% of completions despite representing just 8% of the wider market, while England’s share was 71%, down from its normal 85%.
Within England, activity was concentrated in lower-priced regions such as the North West, Yorkshire and the Midlands. London saw only 2,765 completions, with an average property value of £402,140.
The government has said the scheme will continue in permanent form but analysts have questioned whether it meaningfully addresses affordability pressures.
LACKLUSTRE IMPACT
Holly Tomlinson, financial planner at Quilter, says: “The latest statistics show the lacklustre impact the scheme has had so far, and just how ineffective the Government’s permanent version of the scheme is likely to be.
“While the government’s decision to make the Mortgage Guarantee Scheme permanent may help at the margin, it does not create homes or meaningfully lower borrowing costs.”
She also warns that wider tax changes mooted for the coming Budget could exacerbate market pressures.
“One rumour focuses on replacing stamp duty with a proportional property tax. While this would recognise that the current system is deeply flawed, there is a danger of creating new problems. A levy on sales above £500,000 might sound like a tax on wealth, but in many regions it would capture ordinary homes. If transactions higher up the chain are taxed heavily, it risks grinding the whole system to a halt.”
